China GDP growth to stay 7%

The Straits Times
Nov 13, 2008 | 9:24 PM
China GDP growth to stay 7%

CHINA'S multi-trillion yuan plan to boost its economy will keep growth above seven per cent but its global impact will be limited, the Asia chief of US bank Morgan Stanley warned on Thursday.

Mr Stephen Roach said without the four trillion yuan (S$886 billion) stimulus package, China's gross domestic product growth could fall to six per cent next year due to lower demand for Chinese exports in major economies.

China's GDP, which grew close to 12 per cent last year, slowed to 9.0 per cent in the third quarter this year, according to government figures, as shipments to the US fell amid the world financial crisis.

The recession in Europe and Japan, which collectively account for 30 per cent of Chinese exports, will further hurt shipments, Mr Roach told reporters on the sidelines of a Morgan Stanley Asia conference.

With intra-Asian demand also easing, Mr Roach said the stimulus package announced by Beijing on Sunday will prevent the growth rate from going to six per cent, but will not leave it much above seven per cent.

Chinese state press reported on Monday that the Chinese economy is expected to grow between eight and nine per cent next year, according to central bank governor Zhou Xiaochuan.

China has said the stimulus plan would increase spending on infrastructure and a range of other sectors.

Mr Roach said China's economy growing at more than seven per cent will help Asia to hold GDP growth at five per cent, and allow the region to emerge from the financial crisis better than other areas.

However, Mr Roach said China 'is not in a position to save the world,' because its economy is relatively small and the level of per capita income is too low.

'It has a growing impact on the world economy but China is still principally an outward-looking, export-led economy with a very low share of internal demand,' he said.

Morgan Stanley's economist for China, Qing Wang, told AFP on Wednesday that the country accounts for only 10 per cent of the global economy.

'I think the role of the package is to prevent the Chinese economy from a hard-landing,' Mr Qing said. -- AFP